Procurement term
Bid Bond vs Performance Bond
A bid bond guarantees that a bidder will honour its offer and sign the contract if selected; a performance bond guarantees that the winning supplier will actually deliver the contract as agreed.
Bid Bond vs Performance Bond — what's the difference?
Bid bonds and performance bonds are both forms of security a buyer requires to reduce risk, but they apply at different stages of the procurement and protect against different failures.
A bid bond (also called a tender guarantee or bid security) is provided with the bid. It protects the buyer if a bidder withdraws its offer during the validity period or refuses to sign the contract after being selected. It is typically a small percentage of the bid value and is released to unsuccessful bidders after award.
A performance bond is provided by the winning supplier after award, before or at contract signature. It protects the buyer if the supplier fails to perform — for example, abandoning the work or delivering non-conforming goods. It is usually a larger percentage of the contract value and stays in force through delivery, sometimes into a defined warranty period.
In short: the bid bond secures the promise to enter the contract; the performance bond secures the promise to complete it. A single procurement often requires both — a bid bond at submission and a performance bond at award.
Example
A contractor posts a 2% bid bond with its road-works tender; on winning, it replaces it with a 10% performance bond that remains in force until the defects-liability period ends.
Related terms
Find the tender before your competitor does.
Free to browse the entity graph across 194 countries. One subscription unlocks the full dataset, the API, the CLI and the MCP server.